1. Is angel investing meant for everyone?
Angel investing or venture capital is not meant for those –
- having surplus only for a short period of 3-4 years;
- sitting on a large proportion in illiquid assets;
- having low trust or belief in entrepreneurs and fear misappropriation of funds;
- worried about failure of a few portfolio companies to return the invested capital;
- looking for stable income as dividend or profit share on regular basis;
- planning to meet expenses of a key event from the returns of angel investments such as child education or marriage;
- already over-leveraged without adequate asset backing;
VC or angel investing should be a preferred choice if the person –
- believe innovation creates temporary monopolies that lead to abnormal profits;
- believe that good businesses reward with disproportionate returns although it may take time of 5 to 8 years;
- wish to mentor a start-up entrepreneur and celebrate every win of our start-ups;
- believe our first generation entrepreneurs can take a lead in changing the world;
- wish to express your love for humanity by creating productive jobs;
- you have arrived in life and wish to give back to the society for your success;
- can be at peace on the principle of “seed-it, watch-it, reap-it”.
2. What are the aspects that HNIs should keep in mind before plunging into investing in startups?
Angel investing is about domain expertise, deeper understanding of entrepreneurial mind-set, offering entrepreneurial freedom while coaching them to stay focused on fulfilling their business vision, and engaging, supporting, & collaborating in the initial business modeling phase. Angel investors need to be as passionate about their start-up, as is the entrepreneur, while investor should not be sentimental about it.
3. How should Angel Investor approach their portfolio to maximize returns?
The risks are extremely high in the funding a start-up. During initial phase a start-up goes through every possible risk from people, technology, market, or customer validation. The only way to manage such risk is to build a portfolio of 10 plus start-ups. This does require significant time to manage the portfolio as well as an art of betting big on some ideas.
This post was originally appeared on Yournest blog. Yournest is an early stage venture capital fund, investing in businesses built on vibrant and new ideas enabled by path-breaking use of technology.